The continuation of the upside momentum could lift GBP/USD to the 1.2400 region in the short term, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “While our view for GBP to strengthen yesterday was correct, we did not expect the manner in which it jumped to a high of 1.2311 (we were of the view that it might not be able to hold above 1.2120). Today, we see room for another leg higher in GBP to 1.2350 before the risk of a pullback increases. The strong rally over the past couple of days appears to be overextended and GBP is unlikely to break the next resistance at 1.2400. On the downside, a break of 1.2185 (minor support is at 1.2225) would indicate that the rally in GBP is ready to take a breather.”

Next 1-3 weeks: “We indicated yesterday (01 Dec, spot at 1.2070) that ‘further GBP strength is likely but in order to keep the momentum going, it has to break 1.2155 within the next 1 to 2 days’. GBP not only took out 1.2155, but also a couple of other resistance levels as it rocketed to a high of 1.2311. Upward momentum is unsurprisingly, very strong, and GBP is likely to continue to advance. The next level to monitor is 1.2400. On the downside, a breach of 1.2130 (‘strong support’ was at 1.1960 yesterday) would indicate that the current strong upward pressure has eased.”